The Black Sea region could provide additional support to the dry bulk market in the coming months

Jhe dry bulk market could be boosted by the current situation in the Black Sea grain market. In its latest weekly report, shipping broker Intermodal said that “global grain markets continue to remain tight. Drought, high temperatures, heavy rains, low yields and geopolitical disruptions have increased uncertainty and reduced demand for bulk carriers. Cereals shipping rates, including soybeans, corn and wheat, decreased from 2Q2022 to 3Q2022, and they are also lower year-over-year. Towards the end of the year, the market had its eyes on demand from China after a decision to ease its strict lockdowns, as well as the United States, where the grain market was hit by rail disruptions , low water levels in rivers and lower yields. ”.

According to Intermodal Research Analyst Ms. Chara Georgousi, “Earlier this month, the Xi administration agreed to ease its strict Covid restriction measures, as part of its efforts to revive its stricken economy. by the pandemic. Therefore, the market is now waiting for the extent to which China’s imports will be able to support global trade. In the grain sector, the country remains heavily dependent on imports, such as corn and soybeans, as its domestic production is not sufficient to meet its domestic demand.The current uncertainty due to the ongoing geopolitical disturbances has made the country’s two main suppliers of corn, namely the United States and Ukraine, unreliable and, by As a result, the country recently decided to look to Brazil to secure its supplies, a move that threatens the U.S. share of Chinese purchases.Meanwhile, in October, the country materialized s has been declining soybean imports since 2014 and is now under pressure to replenish stocks. The shortage has prompted Chinese authorities to consider allowing large-scale imports of soybean meal, most likely from Brazil, following the country’s recent decision to open its markets to Brazilian corn imports. Therefore, soybean imports are expected to increase by 1.5 million tons per month to reach 7.5 million tons in November and 9.5 million tons in December.”

Ms Georgousi added that “in the United States, the ongoing disruptions in the railroads continue to overshadow the market. Negotiations over US railroad labor contracts continue unresolved, but the possibility of a strike was raised in mid-December. As harvest draws to a close, low water levels in the Mississippi River put increased pressure on the rail system. Grain handlers and suppliers are increasingly concerned about a potential crisis on the country’s railroads and its ripple effects on the market. Despite a recent improvement in the low water situation on the Mississippi River, a recent report released by the National Oceanic and Atmospheric Administration estimated that the drought affecting the river will most likely persist through January. As a result, grain is piling up as shippers are reluctant to ship grain with barges until January 2023, hoping for improved river conditions in early spring. For example, in the first half of November, a total of 36 ocean-going grain vessels were loaded in the Gulf, down nearly 49% year-on-year. By mid-November, grain movements by barge totaled around 1.23 million tonnes and were reduced by 29% year-on-year.”

The Intermodal analyst concluded that “although a recent drop in ocean freight rates, mainly due to the contraction in global trade and weak Asian demand for bulk grain products, and a rather bleak outlook for cereal markets, certain factors could still support freight and demand”. for bulk carriers in the coming months. In the Black Sea region, the extension of the grain export agreement for another 120 days is expected to support Handysize and Supramax freight rates in the coming months. In addition, Panamax and Supramax vessels, which are mainly deployed in the Brazilian grain trade, could find support from Chinese demand until the end of the year, after suffering from a reduction in demand in recent years. days “.
Nikos Roussanoglou, Hellenic Shipping News Worldwide